I've seen those Kohler specks too and questioned them.
I know that is what they publish, but dam that is loose.
Normally that spec would be beyond repair limit and recommend to rebore oversize.
I would think that much clearance measured @ the skirt would rattle.
I know it is not a small block chevy but that much clearance scares me on a new bore.
old rule of the thumb is usually .001 per inch of bore.
A forged piston runs a little more clearance, and they rattle a bit till they warm up.
Other air cooled engines don't run that loose.
I think your machine shop is smart to question, ya can't make the hole smaller after it is too big.
I would like to hear what others experience is on using a tighter clearance.
Did it seize? or was it ok?
Inquiring minds wanna know!